An imbalance between rising demand and limited supply continues to be an important factor for sustained price momentum. While signs of market recovery have instilled confidence and driven up demand as potential homebuyers take advantage of low prices, the supply of homes for sale has been constrained due to rising homeowners’ expectations about a continued price increase in many fast-rising markets.

Based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas, the FNC 100-MSA composite index shows that home prices nationally were up 0.3% in November. This was the ninth consecutive month that prices moved higher, leading to a total appreciation rate of 5.3% year to date. For the 12 months ending in November, home prices rose 4.2%, the largest year-over-year increase since October 2006. All three composite indices show similar trends of price recovery. Foreclosures as a percentage of total home sales were 20.0% in November, up slightly from 17.6% in October but down from 24.8% a year ago.

FNC’s RPI is the industry’s first hedonic price index built on a comprehensive database that blends public records of residential sales prices with real-time appraisals of property and neighborhood attributes. As a gauge of underlying home value, the RPI excludes sales of foreclosed homes, which are frequently sold with large price discounts reflecting poor property conditions.

Two-thirds of the component markets tracked by the FNC 30-MSA composite index show continued price improvement in November. Las Vegas recorded the largest month-to-month increase, up 3.4% from October. Low inventory has contributed to the city’s rapidly rising prices in recent months. Chicago continues to lag behind other major cities in the housing recovery; home prices declined 0.8% in the 12 months ending in November. The city’s foreclosure sales remain at elevated levels; one in three homes sold are foreclosures or short sales. The recovery in Phoenix continues to significantly outpace the rest of the country. Home prices have surged 23.6% year to date. Foreclosure sales continue to shrink rapidly, making up only 13.0% of total home sales in November.